Environmental Regulations for Business

As concerns about climate change and environmental degradation continue to grow, all businesses, regardless of size, will be impacted by environmental laws and regulations, meaning potential changes to operations and metrics.

International Regulations

The Paris Agreement, which was signed by nearly 200 countries in 2015, aims to limit global warming to below 2° Celsius above pre-industrial levels, preferably limiting the temperature increase to 1.5°. Under the Agreement, countries are required to submit national plans, known as Nationally Determined Contributions (NDCs), outlining their efforts to reduce greenhouse gas emissions and adapt to the impacts of climate change. Businesses can contribute to these efforts by adopting sustainable business practices that reduce their carbon footprint and promote environmental sustainability.

In addition to the Paris Agreement, there are several international frameworks and initiatives that promote sustainable business practices. The United Nations Global Compact is a voluntary initiative that encourages businesses to adopt sustainable and socially responsible policies and practices. The Sustainable Development Goals (SDGs) are a set of 17 goals adopted by the United Nations in 2015 that aim to end poverty, protect the planet, and ensure prosperity for all.

National Regulations

Many countries also have their own regulations and initiatives to promote sustainability and address climate change. For example, the European Union has adopted a number of measures to reduce greenhouse gas emissions, including the Emissions Trading System (ETS) and the Renewable Energy Directive. In the United States, the Environmental Protection Agency (EPA) has established regulations to reduce emissions from power plants and other sources.

Businesses that operate internationally or that have a global supply chain must be aware of these regulations and initiatives and take steps to comply with them. Adopting sustainable business practices not only helps businesses comply with regulations, but also provides economic and reputational benefits. Consumers are increasingly looking for products and services that are environmentally sustainable and socially responsible, and businesses that can meet these demands may have a competitive advantage in the marketplace.

Benefits

By taking proactive steps to address environmental concerns, you can position your business as a leader in sustainability and environmentally-friendly practices.

This can lead to:

• Increased customer loyalty. Consumers are increasingly looking for products and services that align with their values and have a positive impact on the environment.
• Avoiding costly fines and penalties. Governments may impose fines or other penalties on businesses that do not comply with environmental regulations, which can be significant and damaging to the bottom line. By taking steps to address environmental concerns before regulations are enacted, businesses can avoid these penalties and protect their financial stability.
• Saving money in the long run. For example, investing in energy-efficient equipment or renewable energy sources can reduce energy costs and provide a return on investment over time. Similarly, reducing waste and using more sustainable materials can lead to cost savings in the supply chain and reduce waste disposal costs.
• Mitigating risk and improving your reputation. Environmental concerns can create reputational risks for businesses, as consumers may perceive them as harmful to the environment or unconcerned with sustainability. By taking steps to address these concerns proactively, businesses can improve their reputation and reduce the risk of negative publicity or consumer backlash.

What you can do

Businesses will need to be prepared to adapt to new environmental regulations and legislation as they are enacted. This may require investment in new technologies or processes, as well as a shift in business practices and priorities. However, by embracing these changes early on, small businesses may be able to position themselves as leaders in sustainable and environmentally-friendly practices, which could lead to new business opportunities and increased customer loyalty.

You may have already seen our blog post on easy ways to reduce the carbon footprint of your business, but here are the key factors to keep in mind as you start transitioning to carbon neutral.

1. Emissions & Pollution

One major area of impact for small businesses will be in the realm of emissions and pollution. Many governments are enacting regulations aimed at reducing greenhouse gas emissions and limiting pollution from industrial activities. Small businesses that operate in industries with high emissions, such as manufacturing or transportation, may be required to invest in new equipment or processes to reduce their emissions. There are also hidden emissions such as those relating to supply chains and workforce commutes.

2. Waste Management

In addition to emissions, businesses will likely be subject to waste management and resource conservation regulations. Governments may require businesses to reduce their waste or use more sustainable materials in their operations. This could mean investing in new recycling programs, composting facilities, or other waste reduction technologies. Businesses may also be required to use less energy or water in their operations, which could impact bottom lines if they are not prepared to make these changes.

3. Resource Conservation

Another area where small businesses may be impacted is in the realm of product labelling and disclosure. Governments may require businesses to disclose the environmental impact of their products, including the materials used in production, the energy used in manufacturing, and the emissions generated during transportation. Small businesses that produce products with a high environmental impact may be required to label their products as such, which could affect consumer perceptions and demand.

Additional Resources:

World Economic Forum- Why sustainability is crucial for corporate strategy

Reuters- Policy Watch: Europe beefs up Green Deal in response to Biden’s climate subsidies

McKinsey- Consumers care about sustainability — and back it up with their wallets